“The best journalists and writers do not simply relay information, their value is in discovering what really matters to people.”
Nora Ephron
I always keep this advice from the late author, Nora Ephron, in mind as I write posts for this newsletter. Although the issues I write about are important to me, it doesn’t mean that I can make it clear why these issues should be important to you and your families. For example, if you are not part of the millionaire and billionaire class, like the vast majority of Americans, why would raising their taxes matter to you?
That’s what I’m trying to do here: write about issues that should matter to most of us if we had the time to think about them, to read about them, and then to take the extra step and figure out the impact of these specific issues to our lives and to the lives of our fellow citizens. One of the great things about this platform—Substack— is that basically the material is curated for you, so if you are interested in, say, the intersection of economic, racial and environmental inequality, and are ticked off at the growing wealth gap, you would subscribe to this newsletter. You might notice that many Substack writers take curating a step further and offer even more specific writings on a particular issue that might illuminate your path to its understanding. My Sunday Evening Reads attempt to do just that with recommended readings on a very specific issue. But I try to explain why each of these readings shed light on the topic and might help you figure out the impact of the issue on your life and the “life” of our country.
Emily Litella always got it right even when she got it wrong.
So…what is all this fuss I keep hearing about a “wealth tax”? It’s important to know, first off, that I’m far from an expert in any kind of tax and was thrilled when I barely passed the “Federal Personal Income Tax” class required in law school. But there are basic facts about federal taxes that we should all know: the first federal income tax was created in response to the civil war (our government needing revenue and fighting wars seemed to coincide through the centuries), and the precursor to the IRS was started then, too, called the Office of the Commissioner of Internal Revenue.
The federal income tax as we know it today, was enacted in 1913, and was always a “progressive tax”, meaning the more you earned in income, the more you paid in taxes, up to a top limit, which has varied by double digits over the years.
But a “wealth tax” is something different: it is a tax on a person’s overall net wealth, their total assets minus their total debt for the year, not just their income. Although it may initially present some problems, primarily in accurately assessing a person’s overall wealth, I think there is way too much fuss being made about this tax—let’s choose a minimum amount of wealth it will apply to and a maximum percentage taxed and collect that revenue.
Let’s look at a few essential readings on the wealth tax proposed in recent years:
— This “Explainer” article from the Associated Press discusses the basics of the wealth tax being proposed today by progressive democrats as both a way to make our economic system more fair and to help pay for President Biden’s proposed “Build Back Better Plan”. Interestingly, talk of a wealth tax heated up during the pandemic, which netted billionaires, like Elon Musk and Jeff Bezos much greater profits than usual.
“This new tax would apply solely to people with at least $1 billion in assets or $100 million in income for three straight years. These standards mean that just 700 taxpayers would face the additional tax on increases to their wealth, according to a description obtained by The Associated Press of the proposal of by the chairman of the Senate Finance Committee, Sen. Ron Wyden, D-Ore.”
— This pre-pandemic political piece from NPR News explains both Senator Warren’s and Senator Sanders’ quite different wealth tax proposals as put forward during their respective presidential campaigns. But both of these tax proposals would reach a much larger number of wealthy individuals than the billionaire’s tax now being proposed.
“A wealth tax polls very well — including among Republicans. In July [2019], a poll from the New York Times and Survey Monkey found that two-thirds of all Americans, including 55% of Republicans, approved of a 2% wealth tax on all people with wealth over $50 million.”
https://www.npr.org/2019/12/05/782135614/how-would-a-wealth-tax-work
— This recent article from Forbes explains the pros and cons of a wealth tax in substantial detail.
“A wealth tax seems fairer to some. A billionaire entrepreneur who owns their own company, like Bezos or Zuckerberg, is currently able to delay taxes on their business wealth. “If you never sell the stock, you will remit no capital gains taxes. If you pay no dividends, you will remit no individual income taxes at all as a result of owning that stock. To some, there is something unsettling about people who have tens of billions of dollars of wealth who pay little in taxes,” said [Jeff] Hoopes [associate professor at the University of North Carolina and the research director of the UNC Tax Center.] They would not have the same ability to avoid a wealth tax.”
https://www.forbes.com/advisor/investing/what-is-a-wealth-tax/
— Oh that silly Elon Musk…Is he going to sell more of his Tesla stock so he’ll actually have “income” and have to pay the reduced capital gains tax? Here’s an NPR piece from just yesterday that helpfully explains why a wealth tax would be more likely to snare the ultra-wealthy into paying a greater share of taxes.
“Rather than sell their shares, the super rich can borrow against their holdings. In effect, they use them as collateral for loans. ‘They have so much stuff that they can convince a bank to lend them money for their cashflow needs," [Scott]Dyreng [a professor of accounting at Duke University] says. "So, they don't need to have income. They just have assets that back loans.’”
And finally for this evening, a hilarous essay written by Nora Ephron on the possibility of wealth.
Why is the implementation of some form of wealth tax important for most Americans? Not necessarily to narrow the wealth gap between the very richest and everyone else, although it will do that to a small extent, but to ensure that billionaires pay a larger share of taxes (wealth, as we have learned) is a lot more difficult to hide than income. And this revenue can pay for things that working class Americans desparately need, like child care tax credits, paid family leave, expanded health insurance coverage, repaired roads and bridges, efficient public transportation, and more. And this in turn, should help many more Americans thrive rather than just exist day-to day.
Please share your thoughts! Do you think a wealth tax will benefit our country? Why or why not?
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Sunday Evening Reads